January 3, 2019 [COLEGIO SAN AGUSTIN - BACOLOD]

THEORIES (SENIOR LEVEL)

Easy
Auditing

1. Which of the following would be a long-range rather than a short-range planning topic?

a. Production scheduling.
b. Inventory policy.
c. Product quality.
d. Advertising budget

Answer: C

Solution:
a. Incorrect. This would seldom be a long-range topic.
b. Incorrect. This would rarely be a long-range concern.
c. Correct. This would be a long-range planning topic because it affects the company’s market
position, which entails long-term consideration.
d. Incorrect. This is a certainly a concern, but usually is not for long-range planning.

Managerial Accounting

2. Product and service costing information is prepared for

a. manufacturing companies with inventory.
b. merchandising companies.
c. service providers.
d. each of the other four answers..

Answer: D

Moderate
Audting

1. Which of the following tests would best assist the auditor in deciding whether to investigate this
anonymous tip further?

a. Comparison of the current quarter’s maintenance expense with prior-period activity.

b. Physical inventory testing of replacement parts for existence and valuation.

 January 3, 2019 [COLEGIO SAN AGUSTIN - BACOLOD]

c. Analysis of repair parts charged to maintenance to review the reasonableness of the number of
items replaced.

d. Review of a test sample of parts invoices for proper authorization and receipt

Answer: C

Solution:

a. Incorrect. The current quarter’s expense would equal the prior period’s activity unless the
manager just started this fraud. The auditor has no information on how long this might have
been occurring.
b. Incorrect. Physical testing would not locate nonexistent parts that have already been charged to
maintenance.
c. Correct. An analysis of repair parts charged to maintenance would quantify the excessive
number of items and detect that abuse may be occurring.
d. Incorrect. Lack of segregation of duties allowed the fraud to occur. The manager was authorized
to process both the purchase and receipt, so the test would only verify the fraudulent
paperwork.

Managerial Accounting

2. You are given the cost and volume information below:

Volume Costs
1 unit $15
10 units 150
100 units 1500

What type of a cost is given?

a. fixed cost
b. variable cost
c. step cost
d. mixed cost
e. rent cost.

Answer: B
 January 3, 2019 [COLEGIO SAN AGUSTIN - BACOLOD]

Difficult
Auditing

1. Internal auditors must determine appropriate and sufficient resources to achieve engagement
objectives. When determining the necessary resources needed to perform an engagement,
which of following should the auditor consider?

I. The number and experience of the auditing staff.

II. Knowledge, skills and other competencies of the auditing staff.

III. Proper sampling technique.

IV. Probability of errors, irregularities, noncompliance and other exposures.

a. I and II only.

b. I and IV only.

c. II and III only.

d. III and IV only.

Answer: A

Solution: I and II. Correct. Internal auditors consider the following when determining the
appropriateness and sufficiency of resources:

• The number and experience level of the internal auditing staff.

• Knowledge, skills, and other competencies of the internal auditing staff when selecting internal
auditors for the engagement.

• Availability of external resources where additional knowledge and competencies are required.

• Training needs of internal auditors as each engagement assignment serves as a basis for meeting the
IAA’s developmental needs.

III. Incorrect. Using the proper sampling technique is a means to achieve to the engagement objective.

IV. Incorrect. The probability of errors, irregularities, noncompliance, and other exposures should be
considered when developing the engagement objectives, not when determining the appropriateness
and sufficiency of resources.
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Managerial Accounting

2. Which of the following statements regarding graphs of fixed and variable costs is true?

a. Variable costs can be represented by a straight line where costs are the same for each data
point.
b. Fixed costs can be represented by a straight line starting at the origin and continuing through
each data point.
c. Fixed costs are zero when production is equal to zero.
d. Variable costs are zero when production is equal to zero.
e. Fixed and Variable costs are curvilinear form above zero on the “Y” axis.

Answer: D